Your Linley & Simpson guide to buy to let tax changes

Changes to the way UK landlords pay tax on their rental properties are being phased in from April 2017 - but more than 8-in-10 of you say you will not be deterred by the potential cost increase. 

A new survey by insurance broker Simply Business to coincide with Government’s shake-up of tax relief has revealed that no fewer than 83 per cent of buy-to-let investors said it would be “business as usual” – a clear signal of confidence in the sector, and the returns on investment it can still offer. 

As you would expect, Linley & Simpson’s specialist buy to let team is on hand to offer help and guidance about both current and future investments. 

We can also put you in touch with financial advisors, tax experts and accountants who will be able to advise on ways in which the impact can be minimised - tailored as always to your own circumstances. 

In short, the changes will mean that, going forwards, you will have to pay tax on turnover – rather than the difference between rental income and mortgage interest. 

Currently, tax is due on profits at a landlord’s highest rate of income tax. 

But between April 2017 and 2020, this system will be gradually replaced. 

All landlords will pay tax on the full income amount, less tax relief which will eventually be fixed at 20 per cent. 

Landlords who do not need mortgage borrowing to fund their portfolio are unaffected.

According to HM Revenue and Customs, there will also be no impact if you are a: 

  • UK resident company 
  • non-UK resident company 
  • landlord of furnished holiday lettings 

It's important for you to remember that the changes are being introduced incrementally over the next four tax years, so there is time to plan ahead with our support and advice. 

The allowable deduction from property income will be restricted to 75 per cent in 2017/18. The following year, it will be capped at 50 per cent, and in 2019/20 it will be reduced by a further quarter to 25 per cent. By 2020/21, the finance costs of every landlord will be claimed at the basic rate of tax reduction. 

Other positive factors to bear in mind include the fact that there is still a good choice of very competitive buy to let mortgages; rental demand in all our 11 branch locations remains very high; and that increasing property prices continue to bolster the capital element of your investment. 

Against this backdrop, it is also reassuring to see that that buy to let is still regarded by fellow landlords as an attractive long-term investment in the UK. 

New research shows that landlords are more optimistic about the outlook for the private rented sector than a year ago. 

Furthermore, nationally some 37% of landlords anticipate growing rents over the next six months, a year-on-year increase of 36%. 

The changes are quite complex – so please give us a call or arrange a meeting so we can guide you through everything to ensure every Pound of your investment still goes as far as possible. 

You can read more about the changes, which are illustrated with a few helpful case studies, by accessing a dedicated Government webpage here: 
https://www.gov.uk/government/news/changes-to-tax-relief-for-residential-landlords 

You can read more about the Simply Business research here: 
http://www.simplybusiness.co.uk/knowledge/articles/2017/03/83-per-cent-of-buy-to-let-landlords-are-not-fazed-by-tax-changes/ 

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